Vendor Relationship Management

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VRM, or Vendor Relationship Management, is the reciprocal of CRM or Customer Relationship Management. VRM describes a set of tools, technologies and services that help individuals go to market and manage relationships with vendors. In turn, vendors who align themselves to these tools, technologies and services will have the opportunity to build better relationships with their customers.

The goal of VRM is to improve the relationship between the demand-side and the supply-side of markets by providing new and better ways for the former to relate to the latter. In a larger sense, VRM has the potential to improve markets and their mechanisms by equipping customers to be independent leaders and not just captive followers in their relationships with vendors and other parties on the supply side of the marketplace.

ProjectVRM, at Harvard University's Berkman Center for Internet and Society, is working to support development of VRM tools and methodologies to provide customers with both independence from vendors and ways to engage with vendors. The project is headed by Doc Searls, a fellow with the Berkman Center.


[edit] History

The concept that it is impossible for vendor-side CRM systems to bear the full burden of relating with customers, and that there should be a way for the customers to bear some of that weight, has been discussed since CRM systems became established in the mid-1990’s. The idea that the Internet could provide tools to make markets work for both vendors and customers in ways that don't require the former to "lock in" the latter was developed in the The Cluetrain Manifesto.

Since individuals controlling their own data on the Internet is closely tied to individuals controlling their own identity, this became a focus of use cases in the user-centric identity community. At Digital ID World 2005, Drummond Reed suggested the term "CoRM" (Company Relationship Management) in a birds-of-a-feather discussion with Cluetrain author Doc Searls.

However "CoRM" didn't work well as an acronym because it had the same starting letter as "CRM". When Doc convened a Gilmore Gang podcast a few months later, the topic came up and Mike Vizard suggested the term "Vendor Relationship Management". It stuck, and Doc began pursuing the subject in earnest, initiating Project VRM when he became a fellow at the Berkman Center for Internet & Society in 2007.

[edit] Problems With CRM

CRM, as originally envisaged, was a reasonably attractive proposition to the end customer. The idea was that an organisation would build a more complete view of the customer across their many touchpoints (retail, phone, email, events, etc.), and then, via investing in software, changing culture, and integrating marketing, sales and service, the organization would be able to be more responsive to the customers needs and provide more satisfying sales and service.

However, more often than not, organisations underestimated the cost of the cultural change – or decided (wrongly) they could do without it. Many also tended to focus more on the cost saving potential of the new technologies than the relationship improvement potential. But one structural problem emerged to surpass all the tactical issues with the vision or how it was deployed: it is impossible for any one organisation to build a comprehensive view of their customer. Some, with great effort, can build a complete view of THEIR OWN relationship with a customer; but they will still be largely unaware of the many other supply relationships that the customer typically maintains (over 100 would not be unusual).

Only the individual, when given access to the necessary tools and processes, can create anything approaching a complete view of their supply requirements.

[edit] Principles of VRM

VRM recognizes a series of principles [1]. These are:

  1. VRM provides tools for customers to manage relationships with vendors. These tools are personal. They can also be social, but they are personal first.
  2. VRM tools are customer tools. They are driven by the customer, and not under vendor control. Nor do they work only inside any one vendor’s exclusive relationship environment.
  3. VRM tools relate. This means they engage vendors’ systems (e.g. CRM) in ways that work for both sides.
  4. VRM tools support transaction and conversation as well as relationship.
  5. With VRM, customers are the central “points of integration” for their own data.
  6. With VRM, customers control their own data. They control the data they share, and the terms on which that data is shared.
  7. With VRM, customers can assert many things. Among these are requests for products or services, preferences, memberships, transaction histories and terms of service.
  8. There is no limit on the variety of data and data types customers can hold — and choose to share with vendors and others on grounds that the customer controls.
  9. VRM turns the customer, and productive customer-vendor relationships, into platforms for many kinds of businesses.
  10. VRM is based on open standards, open APIs and open code. This will support a rising tide of activity that will lift an infinite variety of business boats, and other social goods.

[edit] Challenges for VRM

For VRM to work, vendors must have a reason to value it, and customers must have reasons to invest the necessary time, effort and attention to making it work. Solving this "chicken-and-egg" problem for both sides is the primary challenge for VRM. To do this VRM supporters will need to show a clear "win/win" for both customers and vendors; VRM cannot be "one hand clapping" any more than CRM is currently.

[edit] VRM Capabilities & Standards

Following are some of the generic capabilities listed at the Project VRM website that are anticipated to emerge as part of VRM adoption.

[edit] Personal Data Stores

This is a generic term for one or more services that help individuals gather, store, protect, analyze, share and use information describing themselves, their relationships, their transactions, and their intentions.

VRM envisions that personal data stores will become the means by which individuals plan, administer and organize many aspects of their daily lives as well as conduct interactions and transactions with vendors. With personal data stores, individuals will be able to pull together their own:

  • Administrative records and details
  • Contact databases: friends, family, colleagues etc.
  • Transaction histories: products and services purchases, etc.
  • Interaction histories: records of correspondence
  • Supplier data ('my doctor', 'my plumber', etc.)
  • Personal preferences e.g. 'favored' brands and organizations vs 'blacklisted' brands and organizations
  • Plans for life projects (trips, moving home etc)
  • Information gathered and collected to help inform decisions and actions about all the above.

[edit] Personal Data Analytics

Just as vendors mine and analyse the data in their CRM systems to better understand their customers, individuals will be able to mine and analyse the VRM data in their own personal data stores to better understand their needs and make better buying decisions. Personal data analytics can help users:

  • Track trends such as personal spending, calorie intake, household energy usage, car mileage, etc.
  • Use 'people like you' comparisons to highlight areas where their resources could be better managed.
  • Anticipate and understand spending changes after major life events, such as marriage, having children, getting divorced, etc.

[edit] Request for Proposal (RFP)

A Request for Proposal (RFP) is a message sent from an individual to a company, set of companies, or marketplace declaring the individual's need for a product or service. RFPs are a "reverse market" where customers publish their needs/requirements/specifications and vendors can respond with their offer/price/terms. This creates an environment where the consumer has a direct the product or solution, as opposed to accepting a solution that by its very nature is advantageous to the vendor.

RFPs can range from simple commodity requests (e.g. insurance renewal, new lawnmower, laptop computer) to specifications for products or services that do not even exist yet. They can take many forms:

  • One-to-one, where a named individual sends his request directly to one or more named companies
  • Aggregated, where multiple individuals' requests are collated and passed on to companies by an intermediary. Companies then respond to these RFPs either on an individual or collective basis.
  • Anonymized, where an intermediary informs a company or set of companies that a specific number of customers are seeking out a particular product or service, but access is only provided through the intermediary until a transaction is closed.

[edit] Permissions Management and Reverse Messaging

Though "permission marketing" has become a buzzword, in practice it has not lived up to its hype. True permission management must put the individual fully in control, allowing them to specify the "rules of engagement" for marketing relationships and to maintain that control over time.

Permissions management covers both receiving information and releasing information on a timely and relevant basis. In the former case, for example, an individual may be planning to buy a new car in June. He could specify his willingness to receive messages about new cars, in a specific price bracket, from specific brands/dealers, in the months of April and May, but be assured that all such communications will cease June 1. This is also called "reverse messaging", and its success hinges completely on the individual's confidence that they have 100% control over the reverse messaging channel, i.e., they can fine tune it or shut it off just as they can with their TV. This can be accomplished using specially-generated addresses (such as a custom email or instant messaging address) whose lifespan is controlled by the user.

Individuals can also choose what data to release to what vendors, for what purposes, on what terms and conditions. For example, a person may want to release information about:

  • Medical history and lifestyle, to health researchers, on an anonymous basis, for free, for the purposes of cancer research.
  • Their current inventory of hardware and software, to a specialist retailer/reseller, on a named but once-only use basis, for the purposes of advice on solving a computing problem or buying a new peripheral.
  • Clothing and cosmetic brand preferences, on an anonymous basis, to marketing companies, in return for a fee.

[edit] Power of Attorney Services

Many aspects of managing a supply relationship are tedious and time-consuming, such as renewing insurance or performing scheduled maintenance on a vehicle. As a result many buyers settle for something far from the best value just to avoid the hassle.

With power of attorney services, individuals can give buying agents permission to act on their behalf, within certain parameters, without the need for specific detailed negotiation. For example, the individual may give power of attorney to the agent to sweep the market for best prices for insurance contracts with equivalent terms, one month before their current contract is due to come to an end.

[edit] Problem Solving Communities (PSCs)

Before purchasing a product or service, individuals often need to answer a long series of questions, such as:

  • What are the available options?
  • What things do I need to do achieve my desired outcome?
  • How do I do x or y?
  • What are the hidden pitfalls that I ought to be aware of?
  • Who can I trust?
  • Which is better for somebody in my circumstances, option A or option B?

Although online and offline services exist to help individuals in some cases, often the best source of information is other individuals facing the same decision. Problem solving communities tap this potential by collecting answers other people have discovered and making them available, avoiding the need for each new individual to reinvent the wheel.

VRM has the potential to bring real economies of scale to this process. If it costs $100 to research and formulate a good answer to a certain question, then it adds $100 to the cost of the product or service in question. But if the same answer is used 1000 times over, the unit cost falls from $100 to $0.1: a productivity boost of 99.9%.

[edit] Personal Scenario Planning

Lastly, there are some events in our lives which few of us encounter often enough to become expert at handling them: getting married or divorced, moving, organizing a trip round the world, coping with a life threatening illness or accident, surviving the death of partner, etc.

Scenario Planning is like a specialized type of problem solving community. It identifies best practices, pitfalls to watch out for, and other essential knowledge about a key life event. For example, if you are getting married, a scenario planning service can help you organize details such as venue, ceremony, invites, attire, presents, catering, travel, honeymoon, etc.

Since many of these decisions involve vendor relationships, scenario planning can integrates many of the other components of VRM systems, bringing them all to bear to simplify what can otherwise be an overwhelming set of choices in a short period of time.

[edit] Related Initiatives

[edit] Internet Identity

VRM is closely related to Internet identity for the simple reason that in order to control their own data and relationships across vendors, users must be able to assert their identity independent from any particular vendor relationship.

Widely known as "user-centric identity", this field includes technologies such as OpenID, i-cards, the Higgins Project, and XDI. All of these technologies seek to provide users with a way to control their identity, data, and relationships without dependence on any one vendor or service provider.

[edit] Data Portability (DP)

Data portability seeks to do for all forms of data what telephone number portability has done for phone numbers. DP promotes the ability for users to move and share their identity, contacts, photos, videos, or any other form of personal data from one website or web service to another. Like Internet identity, data portability is essential to VRM because without it, users can be "locked in" to vendor relationships and restricted from full freedom-of-choice.

[edit] Relationship Cards (R-Cards)

Relationship cards, commonly called r-cards, are a new type of i-card developed by the Higgins Project that enable automated data sharing relationships. R-cards can instantiate any type of relationship – person-to-person, person-to-vendor, or vendor-to-vendor – and can be used to share and automatically synchronize changes to any type of data, from an email address to a loyalty points balance to a wedding gift registry.

[edit] References

  1. ^ "Because principles are good to have", ProjectVRM Blog, 2008-07-16

[edit] External links

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